State of the Music Industry 2006

THIS IS A SHORT ESSAY I WROTE ABOUT THE STATE OF THE MUSIC INDUSTRY IN THE FALL OF 2006.

Statistics really put everything into perspective. In this case particularly, these statistics quiet the public’s anxious cries that the music business is dying with the onset of music downloading. It’s important to realize that the consumer market is not decreasing, but that it’s shifting. Though RIAA’s 2005 Consumer Profile notes a 10% decrease for years 1996 to 2005, in record stores being the channel for consumers, it is important to realize that in the year 2005, the internet was 8% of the consumer music channel and music download was another 6%. Together, the internet and music download add up to 14%, making up for that 10% decline. The digital music market is the new, alternate avenue for purchasing music, though it still is not the dominant one; physical CDs (full-length) are still 87% of the market.

One way in which the market has not changed since I was a kid is the fact that singles are still highly in demand. I remember being about twelve years old and making my almost daily trip to Sam Goody to see what new singles came out. Not only was I attracted to that aisle because I wanted to buy that “it” song that had just been played over the radio 100 times, but because singles were cheap and affordable for a kid like me. I even remember buying my friends CD singles for their birthday, to the extent that everyone always looked forward to their birthdays, because I always found the coolest CD single for them. Because of these memories, it is not surprising to me to look at statistics for 1999 and see that 56 million CD singles were sold. This desire for acquiring CD singles is still very much present, though it has shifted to the digital download market, which sold 367 million singles in 2005. What’s interesting to see is that sales for downloaded albums are not nearly as much as the single downloads market, in fact they’re at a mere 13 million in 2005. Why are consumers more willing to buy their albums in a record store and buy singles online? Why hasn’t the trend gone through with digital album sales? It would be real interesting to me to find out what the numbers are for which age group is buying physical albums and which age group is downloading digital singles of if there really is a discernable difference. From my vantage point, I think real fans buy albums, while radio pop listeners turn to iTunes to grab a hold of the newest radio single. Speaking of age, it is incredibly interesting to see that the largest bulk (25% of the market) of consumers is adults 45+. That statistic alone reveals a lot. It seems that the average younger adult is too busy to actively listen to music, being tied up in either developing their career or in chasing after their kids in the house. It also explains why physical sales are still the major fraction of music sales, selling about 700 million albums in 2005; adults above 45 are less likely to log onto iTunes and download the latest album, even if it is one of their old favorites. In addition, one would think that the teenage age group consumes the most music, but they only buy about 12%. And the teenager/lower twenties group music consumption has decreased about 5% since 1996 and I’m convinced it has to do with the fact that most college students get most of their music illegally—either through whatever’s left of the P2P services or rTunes, a service that allows students to upload playlists from classmates in their network.

As music business people, we need to decide whether we want to adapt to this market or try developing ways to expand sales in places that are weaker. For example, is it smarter to target that 45 plus age group? Is it smarter to continue feeding into this singles-market because we see the success of the digital singles market? Or should the music industry develop music service sites that target teens, helping them draw away from illegal sites, and maybe encourage digital album sales (through bonuses like an additional music video.) I think the industry is doing a good job in balancing both acts. Obviously there is still an emphasis on physical goods, but there is also that innovation through digital websites to make downloading a more appealing process. For example, eMusic is an example of a website that operates for an indie audience, allowing members to discover new music, while buying music as well. There lies the hook—it is not just an alternate way to buy music, but a way to discover music, and find recordings you’ve never heard before.

On a different note, I sometimes think that with the new digital trends, consumers are actually more confused, and maybe that is why physical sales are still much greater than digital sales. iTunes is the only service that is simple and clear. You want music, you pay 99 cents or $9.99 for an album, and you got it. The subscription-based music sites, though being a great deal for great music fans, is complicated—allowing members to listen to as much music as they want, but obliging them to pay for each track if they want to transfer the music to a portable device (not an iPod of course) or a CD-R. Over the past couple of months, I’ve been flipping back and forth from service to service, not completely satisfied with any of them. I originally signed up to Rhapsody, not caring that it was not compatible with an iPod (figuring I would download tracks onto CDs), and then later found out that I needed to pay in addition to the $10 a month fee to actually obtain songs. I felt as if I was misled to thinking that the $10 covers everything because it was never explicitly said that each track would cost me money. I’m not sure if many people went through the same process, but I feel like that’s a definite drawback.

Since I am a college student and I have to be careful with the amount of music I spend on music, I will most likely buy an album that I really want from a store and only listen/stream music online through websites like AOL Music (that allows anyone to stream full albums for free), Pandora, Free Napster (which allows users to listen to any song 3 times in entirety), Free Rhapsody (users can listen to 25 songs each month for free.) (Even Facebook, the college networking website, allows certain members to get a free music sampler from iTunes.)

The Internet definitely allows me to discover more music than I possibly could have years ago. I am definitely more able to go back in time slightly and really appreciate music from earlier decades (whether its songs from the Beach Boys I had never heard before, or songs from the American band The Byrds, to whether it’s discovering that a song I thought was originally written by an artist of my time really was taken from a 60s artist.) But I don’t necessarily know if more music necessarily translates into better quality music or a better listening experience.

The Internet definitely makes the whole music listening/buying process a little more quick and less special. No longer is there that moment of suspense for that first note, the first breath of a voice, like there is when buying a new CD and placing it into a stereo. Wow, that’s quite a moment. I wonder if most people can say that about placing their cursor on a song title and clicking “purchase.”